2022 Index of Economic Freedom

Maldives

OVERALL SCORE47.3
WORLD RANK161
Rule of Law

Property Rights47.2

Judicial Effectiveness32.1

Government Integrity43.1

Government Size

Tax Burden96.9

Government Spending55.2

Fiscal Health0.0

Regulatory Efficiency

Business Freedom39.8

Labor Freedom51.6

Monetary Freedom77.2

Open Markets

Trade Freedom60.0

Investment Freedom35.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.5 million
  • GDP (PPP):
    • $7.4 billion
    • -32.2% growth
    • -0.7% 5-year compound annual growth
    • $19,609 per capita
  • Unemployment:
    • 7.2%
  • Inflation (CPI):
    • -1.6%
  • FDI Inflow:
    • $348.0 million

The Maldives’ economic freedom score is 47.3, making its economy the 161st freest in the 2022 Index. The Maldives is ranked 36th among 39 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

After growing from 2017 through 2019, the Maldives’ economy contracted in 2020 and recovered in 2021. During those five years, economic freedom at first strengthened but then weakened significantly. Driven down by weak scores for fiscal health and business freedom, the Maldives has recorded a 3.0-point overall loss of economic freedom since 2017 and has fallen from the “Mostly Unfree” category to the “Repressed” category. Although the economy is lightly burdened by taxes, investment freedom and financial freedom are very anemic.

IMPACT OF COVID-19: As of December 1, 2021, 251 deaths had been attributed to the pandemic in the Maldives. The economy contracted by 32.2 percent in 2020.

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Background

The Muslim-majority Maldives archipelago lies southwest of India in the Arabian Sea. Ibrahim Mohamed Solih handily defeated incumbent President Abdulla Yameen in 2018 elections with a surprising 58 percent of the vote. Solih’s Maldivian Democratic Party also won the most seats in the 2019 parliamentary elections. Current Parliament Speaker and former President Mohamed Nasheed (who is also one of Solih’s close friends) survived an assassination attempt in May 2021. Political tensions increased when Yameen took actions to weaken democratic institutions, curtail civil liberties, and tilt the country away from India and toward China, from which he borrowed heavily. Driven by the rapid growth of its tourism and fisheries sectors, the Maldives has become a middle-income country.

Rule of Law

Property Rights 47.2 Create a Graph using this measurement

Judicial Effectiveness 32.1 Create a Graph using this measurement

Government Integrity 43.1 Create a Graph using this measurement

Property rights are limited. The state owns most land and leases it to private owners or developers. The judiciary is slow, politicized, often arbitrary, and subject to external influence. It is estimated that 25 percent of the country’s judges have criminal records. Corruption is endemic at all levels of government. The enforcement of laws remains inconsistent and targets the political opposition. Some whistleblowers and journalists have been jailed.

Government Size

The Maldives government levies no personal income or corporate tax. Bank profits are subject to a profits tax. The overall tax burden equals 17.5 percent of total domestic income. Government spending has amounted to 38.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 11.9 percent of GDP. Public debt is equivalent to 142.6 percent of GDP.

Regulatory Efficiency

Upgrades to telecommunications infrastructure have been extended to outer islands, but some further upgrades were slowed by COVID-19, which also has contributed to widespread job losses. About 70 percent of the labor force works in services. In 2021, according to the finance ministry, the government subsidized more than 60 percent of the price of staples (rice, sugar, flour) and funded higher subsidies for electricity and fuel.

Open Markets

The Maldives has two preferential trade agreements in force. The trade-weighted average tariff rate is 12.5 percent, and nontariff barriers persist. A new foreign investment code that still excludes several sectors from foreign participation and ownership was adopted in 2020. The financial sector is shallow and dominated by banking. Costly credit and limited access to financial services impede development of a vibrant private sector.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore84.4-5.3
2New Zealand80.6-3.3
3Taiwan80.11.5
4Australia77.7-4.7
5South Korea74.60.6
6Japan69.9-4.2
7Samoa68.36.4
8Malaysia68.1-6.3
9Brunei Darussalam64.8-1.8
10Indonesia64.4-2.5
11Kazakhstan64.4-6.7
12Mongolia63.91.5
13Thailand63.2-6.5
14Vanuatu62.92.4
15Philippines61.1-3.0
16Micronesia6110.6
17Tonga60.83.3
18Vietnam60.6-1.1
19Bhutan59.31.0
20Kiribati59.214.8
21Cambodia57.1-0.2
22Solomon Islands56.50.0
23Fiji56.4-5.8
24Kyrgyz Republic55.8-7.9
25Uzbekistan55.7-2.6
26Papua New Guinea54.6-4.3
27India53.9-2.6
28Sri Lanka53.3-2.4
29Bangladesh52.7-3.8
30Tajikistan49.7-5.5
31Nepal49.7-1.0
32Burma49.6-5.6
33Laos49.2-4.7
34Pakistan48.8-2.9
35China48-10.4
36Maldives47.3-7.9
37Timor-Leste46.31.6
38Turkmenistan46.2-1.2
39North Korea3-2.2
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